HOUSE 3rd Reading Unamended April 7, 2015 HOUSE Amended 2nd Reading April 6, 2015First Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 15-0161.01 Esther van Mourik x4215HOUSE BILL 15-1205 HOUSE SPONSORSHIP Becker K. and Saine, SENATE SPONSORSHIP Hill and Johnston, House Committees Senate Committees Finance Appropriations A BILL FOR AN ACT Concerning the creation of the tax expenditure evaluation committee of the senate and house of representatives, and, in connection therewith, making an appropriation. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill creates a joint committee of the senate and house of representatives, known as the tax expenditure evaluation committee. The committee is made up of 7 legislative members and 3 nonvoting, nonlegislative members from the office of state planning and budgeting, the department of revenue, and the Colorado office of economic development. The committee is to function during both the legislative sessions and the interims between. The committee is responsible for reviewing evaluations of the state's tax expenditures made by the state auditor, or an evaluation contractor hired by the state auditor, as required in the bill. The committee may recommend legislation for the continuation, repeal, or modification of the evaluated tax expenditures for the following legislative session. The bill further specifies that the committee may make recommendations, or may recommend legislation, to the department of revenue, the office of state planning and budgeting, the Colorado office of economic development, or any other appropriate state agency, regarding improvements of tax expenditure administration. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add part 18 to article 3 of title 2 as follows: PART 18 TAX EXPENDITURE EVALUATION COMMITTEE 2-3-1801. Definitions. As used in this part 18: (1) "Committee" means the tax expenditure evaluation committee created in section 2-3-1802. (2) "Evaluation contractor" means the contractor who may be hired pursuant to section 2-3-1804 (1) to perform the evaluations of tax expenditures. (3) "State auditor" means the state auditor described in section 2-3-102. (4) "Tax expenditure" has the same meaning as in section 39-21-302 (2), C.R.S.; except that it does not include the sales and use tax exemptions found in sections 39-26-102 (20) and (21), 39-26-704 (1) and (4), 39-26-706 (3), 39-26-707 (1) and (2), 39-26-708, 39-26-709, 39-26-713 (1) (d) and (2) (e), and 39-26-724, C.R.S. 2-3-1802. Tax expenditure evaluation committee established. (1) There is hereby established a joint committee of the senate and house of representatives known as the tax expenditure evaluation committee, consisting of: (a) The following voting members of the committee: (I) Two members of the finance committee of the senate, or such successor committee, one of whom is appointed by the president of the senate and one of whom is appointed by the minority leader of the senate; (II) Two members of the finance committee of the house of representatives, or such successor committee, one of whom is appointed by the speaker of the house of representatives and one of whom is appointed by the minority leader of the house of representatives; (III) One member from the joint appropriations committee of the senate and the house of representatives. The speaker of the house of representatives shall appoint the first member from the joint appropriations committee to serve a two-year term. Upon the expiration of that member's term, the president of the senate shall appoint the next member from the joint appropriations committee to serve a two-year term. The appointment of a member from the joint appropriations committee must continue to alternate between the speaker and the president as specified in this subparagraph (III). (IV) Two members from the legislative audit committee created in section 2-3-101, one of whom is appointed by the minority leader of the house of representatives and one of whom is appointed by the minority leader of the senate. (b) The following nonvoting members of the committee: (I) A representative of the office of state planning and budgeting created in section 24-37-102, C.R.S., appointed by the office's director; (II) A representative of the department of revenue, appointed by the department's executive director; and (III) A representative of the Colorado office of economic development created in section 24-48.5-101, C.R.S., appointed by the office's director. (2) The terms of the voting and nonvoting members of the committee are two years from the date of appointment. (3) The committee functions during the legislative sessions and during the interims between sessions. (4) Initial appointments to the committee must be made no later than July 1, 2017. To expedite the work of the committee, subsequent appointees may be designated after the general election and prior to the convening of the general assembly at which such committee is to serve, whether such appointees are members of the then-current general assembly or members-elect of the next general assembly, or both; and such appointees have all the powers and duties and are entitled to the same compensation and expense allowance as members duly appointed under the provisions of subsection (1) of this section. (5) The committee shall elect a chair and a vice-chair, one from the senate membership of the committee and one from the house membership of the committee. The chair so elected shall serve as chair for the first regular session of the general assembly at which the committee is to serve, and as vice-chair for the second regular session; the vice-chair so elected shall serve as chair for the second regular session of said general assembly. 2-3-1803. Organization, procedures, and meetings. The committee may prescribe its own rules of procedure and may meet as often as necessary to perform its functions. 2-3-1804. Powers and duties of the tax expenditure evaluation committee. (1) The committee is responsible for reviewing evaluations of the state's tax expenditures made by the state auditor pursuant to the requirements specified in subsection (2) of this section and pursuant to the schedule set forth in subsection (3) of this section. The state auditor may perform such evaluations by entering into a contract or contracts with an evaluation contractor. Such contract or contracts shall be bid by employing standard bidding practices including, but not limited to, the use of requests for information, requests for proposals, or any other standard vendor selection practices determined by the committee to be best suited to selecting an appropriate evaluation contractor. (2) (a) The tax expenditure evaluation must include the following: (I) The purpose, intent, or goal of the tax expenditure; (II) The intended beneficiaries of the tax expenditure; (III) Whether the tax expenditure is accomplishing its purpose, intent, or goal; (IV) The economic impact of the tax expenditure, including past and estimated future impacts; (V) The extent to which the design of the tax expenditure is effective to accomplish its purpose, intent, or goal and whether the design of the tax expenditure is consistent with best practices; (VI) Whether there are other tax expenditures, state spending, or other government programs that have the same purpose, intent, or goal as the tax expenditure, whether those all are appropriately coordinated, and, if not, how coordination could be improved; (VII) If the evaluation of a particular tax expenditure's economic impact is made difficult because of data constraints, any suggestions for changes in administration or law that would facilitate such data collection; and (VIII) An explanation of the performance measures used to determine the extent to which the tax expenditure is accomplishing its purpose, intent, or goal. The performance measures must be clear and relevant to the specific tax expenditure being evaluated. The state auditor or the evaluation contractor shall consider the original legislative intent as well as subsequent developments in the state's economy, the national economy, and any changes in national, state, or local fiscal policies and conditions. (b) To the extent it can be determined by the auditor or the evaluation contractor, the tax expenditure evaluation should also include the following: (I) The extent to which it is likely that the desired behavior might have occurred without the tax expenditure; (II) The extent to which the tax expenditure is a cost-effective use of resources compared to other options for using the same resources or addressing the same purpose, intent, or goal; and (III) Whether there are any opportunities to improve the effectiveness of the tax expenditure in meeting its purpose, intent, or goal. (3) (a) Notwithstanding the requirements in section 2-3-103 (2), the state auditor or the evaluation contractor shall evaluate tax expenditures and submit the results of the evaluations in an evaluation report to the committee as follows: (I) No later than September 15, 2017, for any tax expenditures in law as of the effective date of this paragraph (a) and any tax expenditures enacted during the first regular session of the seventieth general assembly; (II) No later than September 15, 2022, and each September 15 every five years thereafter, for a reevaluation of the tax expenditures evaluated in the previous evaluation report and an evaluation of any new tax expenditures enacted by the general assembly since the previous evaluation report. (b) By December 15, 2017, and by December 15 every five years thereafter, the committee shall meet to consider the evaluation report submitted by the state auditor or the evaluation contractor. The committee must hold a public hearing, taking testimony from the state auditor or the evaluation contractor and any interested members of the public regarding the results of the evaluation report. The committee may recommend legislation for the continuation, repeal, or modification of the evaluated tax expenditures for the following legislative session. The committee may meet as necessary during the five years between the presentation of the evaluation reports. (4) The committee may make recommendations to the department of revenue, the office of state planning and budgeting, the Colorado office of economic development, or any other appropriate state agency, or may recommend legislation, regarding improvements of tax expenditure administration or regarding any duties the committee has under this part 18. (5) Legislation recommended by the committee that addresses any of the committee's duties pursuant to this part 18 is exempt from the five-bill limitation specified in rule 24 of the joint rules of the senate and the house of representatives, or such successor rule. (6) The department of revenue must provide any requested information, analysis, or data, if available and under the control of the department, as requested by the committee, the state auditor, or the evaluation contractor; except that, if the request includes confidential information, such information must remain confidential in the hands of the committee, the state auditor, or the evaluation contractor, and the committee, state auditor, or evaluation contractor is subject to the same limitations specified in section 39-21-113, C.R.S. Other state agencies may provide information or data as requested by the committee, the state auditor, or the evaluation contractor. 2-3-1805. Staff assistance. The staff of the state auditor and the office of legislative legal services shall assist the tax expenditure evaluation committee in carrying out its duties. 2-3-1806. Repeal of part. This part 18 is repealed, effective July 1, 2028. SECTION 2. Appropriation. For the 2015-16 state fiscal year, $546,114 is appropriated to the legislative department for use by the office of the state auditor. This appropriation is from the general fund and is based on an assumption that the office will require an additional 5.6 FTE. To implement this act, the office may use this appropriation to support the tax expenditure evaluation committee. SECTION 3. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.